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Apple CEO Tim Cook says iPhone 5C wasn't priced as 'junk'

By Steve Johnson, The San Jose Mercury News

Updated:
09/19/2013 04:30:53 PM MDT

CUPERTINO, Calif. — Despite criticism that Apple's new iPhone 5C is too pricey, CEO Tim Cook insisted in an interview published Thursday that the company never intended to make a "low-cost phone" and that "we're not in the junk business."

Investors and some Wall Street analysts had faulted the Cupertino technology powerhouse for setting the iPhone 5C's price too high. Although they had hoped it would go for $300 to $350, making it competitive against some other popular smartphones, Apple announced the price would be $550 without a wireless service contract, about $100 less than the company's top-tier iPhone 5S. Both the iPhone 5S and the 5C go on sale Friday.

Some critics were especially upset because they had thought the 5C could be a big seller in China. But because Chinese wireless carriers don't tend to subsidize phone prices to lure customers as they do in this country, the iPhone 5C is widely expected to be far too expensive for the average Chinese consumer.

In his interview with Bloomberg Businessweek, Cook dismissed such grousing.

"We never had an objective to sell a low-cost phone," he said. "Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost."

Cook noted that in the mobile-device business "there's always a large junk part of the market," but added, "we're not in the junk business."

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"There's a segment of the market that really wants a product that does a lot for them, and I want to compete like crazy for those customers," he said. "I'm not going to lose sleep over that other market, because it's just not who we are. Fortunately, both of these markets are so big, and there's so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business."

Cook acknowledged that he hasn't been pleased to see Apple's stock occasionally slide, in part over concerns about the iPhone 5C's price, but said, "I don't slit my wrists when it goes down."

Andy Hargreaves, an analyst with Pacific Crest Securities, said it makes sense for Apple to offer the phone at a slightly lower cost than the iPhone 5S because many consumers don't need all of the 5S's features. But "I never expected a cheap phone" from Apple, he added, because that's not the company's business approach.

Global Equities Research analyst Trip Chowdhry also saw nothing wrong with the phone's price, adding that his discussions with consumers and others suggest it will be a success.

"There is a very strong interest in 5C," he said, particularly among children and young adults.

However, tech analyst Rob Enderle offered a different view.

"It is really hard not to see it as a cheap phone," which could tarnish Apple's image, he said. "Given most buyers of Apple products have a heavy status aspect to their decision, the 5C doesn't really make a great deal of sense. They likely would have been better off moving up-market with a larger screen device than down-market with a cheaper one. We'll see how this plays out."

During his interview, Cook also took a few shots at smartphones featuring Google's (GOOG) Android operating system.

Because Android phone users can't always update to the latest operating system, unlike users of Apple's devices, some Android customers are still using "an operating system that's 3 or 4 years old," he said. "I can't imagine it." He added that the difference in customer satisfaction between Apple and Android devices "is huge."

Google officials didn't immediately respond to Cook's comments.

Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.

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